Major Snow Storm Keeps Traders Away

Another snow storm and Ben Bernanke kept traders out of the market as stocks pull back and volume falls off.  The second large storm in a week bombarded the east coast keeping many at home and out of the market.  While the snow was falling Bernanke outlined possible tools to remove the liquidity the Federal Reserve has pumped into the market.  At first his remarks spooked the market as stocks sold off quickly fearing the worse.  However, the market found its footing and able to close well off their lows.  Today was healthy for the market as we avoided a distribution day and saw intraday support.

Day four has come and gone and without a follow-through day, but it was a constructive day.  Markets do not move in straight lines and it is healthy for a market to pull back without heavy volume.  Distribution now would certainly diminish the chance we’d get this rally attempt confirmed.

We certainly have some nice stocks setting up both on the technical and fundamental front.  The combination of strong technicals and fundamentals make for an explosive combination.  An even more explosive if we have a confirmed market rally.  Remember, strong stocks make monster moves in confirmed rallies.

There were some interesting internals today as the put/call reached as high as 1.28 during Bernanke’s comments.  The wall of worry is certainly still standing shown by the move in the put/call ratio.  Last week we saw the amount of AAII Bears jump over 40% and it appears the crowd remains bearish.  This does not automatically signal the market will follow-through or not, but it is interesting to note the crowd has turned bearish.

At the lows on Friday the number of stocks above their 20 day moving average reached a low near 20%.  Today, 26% of stocks are over their 20dma signaling the market remains near oversold conditions.  At the highs in January we saw the number of stocks reach well over 80%.  The number of stocks above their 200dma is just 72%.  Keep in mind this is not reason to simply go long stocks, but if our follow-through day comes it will show the uptrend will have legs to run.